U.S. Stocks Decline on Europe, Oil Concerns

Citigroup Inc. (C) and Morgan Stanley dropped at least 2.6 percent. Dell Inc. (DELL) sank 2.2 percent as the third-largest maker of personal computers told investors to expect more slow sales growth for the rest of the year. Abercrombie & Fitch Co. (ANF) tumbled 14 percent as profit at the teen-clothing retailer trailed estimates. Tyco International Ltd. (TYC) rallied 3.4 percent as earnings beat estimates, helped by increasing fire-safety sales.

The Standard & Poor’s 500 Index decreased 0.6 percent to 1,250.51 at 12:10 p.m. New York time, after falling as much as 1.1 percent earlier today. The Dow Jones Industrial Average retreated 72.84 points, or 0.6 percent, to 12,023.32. Oil rose as much as 2.9 percent to $102.29 a barrel, a five-month high.

“The economic data in the U.S. has been getting better, but I don’t think the market should look at that thinking all is fine,” Wasif Latif, vice president of equity investments at USAA Investment Management Co. in San Antonio, which oversees about $50 billion, said in a telephone interview. “There’s a probability that Europe goes back into recession. That can put pressure on the rest of the world,” he said. “When oil goes up, consumers feel that in their pocketbooks and curtail spending.”

Stocks fell after the Bank of England Governor Mervyn King said Britain faces a ‘‘markedly weaker’’ outlook for the economy amid danger from Europe’s crisis. German Chancellor Angela Merkel said the nation is prepared to cede some national sovereignty to the European Union to achieve closer economic and political ties. Italian Prime Minister Mario Monti was sworn in.

Economic Data

Losses were limited after industrial production in the U.S. rose 0.7 percent in October, more than the 0.4 percent median forecast. Confidence among U.S. homebuilders unexpectedly rose in November to the highest level since May 2010. The cost of living in the U.S. unexpectedly fell for the first time in four months, a sign inflationary pressures may be starting to recede.

‘‘The euro-zone debt crisis continues to plague the market,’’ said Kully Samra, who manages U.K.-based clients for Charles Schwab Corp., which has $1.5 trillion of client assets. ‘‘Although U.S. economic data has been steadily improving in the second half of the year, with most of the temporary factors from the first half fading, growth forecasts remain muted.’’

John Paulson, the billionaire hedge-fund manager having his worst year, is cutting risk in his hedge funds further as the European sovereign-debt crisis roils markets, according to two people briefed on the matter.

Main Hedge Funds

New York-based Paulson & Co., which has $28 billion in assets, has cut the so-called net exposure in its main hedge funds to 30 percent, Paulson told investors on Nov. 14, according to the people, who asked not to be identified because the company is private. It was 60 percent about four months ago. Armel Leslie, a spokesman for Paulson, declined to comment on the annual meeting.

The Morgan Stanley (MS) Cyclical Index slid 0.6 percent, paring an earlier loss of 1.5 percent. A gauge of 12 homebuilders in S&P indexes rose 1.9 percent.

Diversified financial companies slumped amid concern that a global financial crisis could hurt profits. Citigroup decreased 2.6 percent to $27.29. Morgan Stanley sank 3.6 percent to $15.36.

Dell slumped 2.2 percent to $15.29. The company missed third-quarter revenue estimates after walking away from $2 billion in potential PC sales to focus on more profitable technology. It gave up billions in ‘‘low-value’’ PC opportunities because it wanted to preserve margins, Vice Chairman Jeff Clarke told analysts yesterday.

Cost of Goods

Abercrombie & Fitch tumbled 14 percent, the biggest decline in the S&P 500, to $47.79. The company’s cost of goods sold rose 34 percent to $429.3 million in the three months ended Oct. 29. Abercrombie, along with other apparel retailers, is contending with higher prices for materials such as cotton and oil and higher labor costs in Asia.

Tyco International rallied 3.4 percent to $47.36. Excluding some items, profit of 92 cents in the quarter through Sept. 30 topped the average estimate of 86 cents from analysts’ projections compiled by Bloomberg.

Research In Motion Ltd. (RIM) added 2.2 percent to $19.55. The maker of BlackBerry smartphones was raised to ‘‘neutral” from “sell” at Goldman Sachs Group Inc., which cited valuation.

Autodesk Inc. (ADSK) jumped 4.7 percent, the most in the S&P 500, to $35.64. The maker of design software reported third-quarter profit of 44 cents a share, exceeding the 41-cent average analyst estimate.

Utility Stocks

Dividends have pushed utility stocks to the biggest gain in the S&P 500 for the first time in 11 years, even though the industry is the only one with profits forecast to fall in 2012.

An index comprising Exelon Corp., Consolidated Edison Inc. (ED) and 31 other power providers advanced 11 percent this year, beating every other group by at least 3.8 percentage points, data compiled by Bloomberg show. Analysts say utility earnings will drop 1.6 percent in 2012.

“The relative performance between these groups should begin reversing,” said David Goerz, the chief investment officer at Highmark Capital Management Inc., which oversees $17.2 billion, in a Nov. 15 e-mail. “Investors have said ‘I’m willing to own safer utilities that aren’t as volatile or favor higher dividend yields over low bond yields.’” That’s something “active managers can exploit,” he said.

 

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